It is raining IPOs both in India and globally. The most interesting among these is the IPO of Coinbase, which went live on Nasdaq on 14th April 2021. It is the first fully-fledged cryptocurrency exchange company to take this huge step.
Executive Chairman of the Blockchain Research Institute, Don Tapscott, termed the Coinbase IPO as “the biggest IPO in history”. Ah, we know it drives your curiosity! We’ll obviously cover that, but first of all, here’s a bit about crypto-exchanges.
Let’s break down these complex terms. In the simplest words, Cryptocurrency is digital money. There are two ways to procure cryptocurrency. One is to deploy complicated software, solve even more complicated mathematical problems and acquire crypto. This process is called Mining. Second is the simpler way, wherein an exchange facilitates potential users to buy and sell these cryptocurrencies. Most go for the second option. And that brings us to crypto-exchanges.
Cool, let’s now dive into the details of the company that became the talk of the town a couple of days ago. Coinbase Global Inc.
What does Coinbase do?
Founded in June 2012, Coinbase Global Inc. is a US-based crypto-asset company that helps investors invest, save, earn, spend, and use crypto.
To simplify, Coinbase is an exchange that acts as an intermediary for a buyer and a seller to meet and transact cryptocurrencies like Bitcoin and Ethereum. Apart from facilitating mere selling and buying, Coinbase provides few other facilities:
The platform also lets its users store their cryptocurrencies safely through its free wallet service.
For retailers intending to accept payments in the form of cryptocurrencies, Coinbase provides software that facilitates such transactions.
Coinbase has also very recently started to provide its users a physical Visa debit card to which the cryptocurrencies can be transferred and used for transactions.
Coinbase offers its very own cryptocurrency, USD Coin (USDC), which is built on the Ethereum platform.
Where many crypto-based companies have failed to secure their users’ information, Coinbase has succeeded in that space as well.
How Coinbase earns might be a question in our minds. Coinbase does not charge anything for holding the crypto, but it charges a margin fee of about 0.50% for crypto purchases and sales, and also a commission over and above this rate for all crypto transactions.
Andreessen Horowitz, a venture capital firm, is the largest owner of Coinbase. Other major investors include Tiger Global, IVP, DFJ Growth, USV, Ribbit Capital, Combinator, Spark Capital, Greylock, MUFG, Paradigm, Polychain Capital, Battery, Initialized and SV Angel.
Financials of Coinbase
Coinbase currently has over 56 million verified users across more than 100 countries. These include both institutional firms and retail clients. The assets held on the platform are $223 billion, representing 11.3% crypto asset market share, and the volume traded quarterly is around $335 billion.
According to a press report, the Monthly Transacting Users (MTUs) are over 6.1 million. For the quarter ended 31st March 2021, total revenue is estimated approximately at $1.8 billion, Net Income of approximately $730 million to $800 million. Adjusted Earnings before interest, tax, depreciation and amortization (EBITDA) was approximately $1.1 billion.
Looking forward, the company presents three possible scenarios for the annual average MTU. High MTUs with an average 2021 MTUs of 7.0 million; Mid, with an average 2021 MTUs of 5.5 million and low MTUs with an average 2021 MTUs of 4.0 million.
Listing Details of Coinbase
On 2nd April 2021, the largest Crypto platform in the US, Coinbase, publicly announced that it would go for a direct listing on Nasdaq. A direct listing is one alternative method of a traditional IPO. In the latter, new shares are created and sold in the market along with the process of underwriting. But in the former, the existing and outstanding shares are sold in the market. In this, no new shares are created.
It was listed under the ticker “COIN”.
Coinbase shares began trading at $381 each, up 52% from a reference price of $250, eventually closing at $328.28. That led to the company being valued at $85.7 billion based on all its outstanding shares, more than 10 times higher than Coinbase’s last private valuation!!
The listing of Coinbase Global Inc. will definitely prove to be beneficial for individuals who are sceptical about directly trading in cryptocurrencies. Also, being listed on the world’s 2nd largest stock exchange is indeed a huge step, as it not only paves the way for other crypto-based companies wishing to be listed but also instill a sense of confidence in the minds of investors that crypto is a good investment avenue.
However, there are still uncertainties attached to cryptocurrencies. The central governments could anytime choose to ban these completely. The company Coinbase has also clearly mentioned about the existence of this uncertainty in a form included in the listing procedure. At the moment, Cryptocurrency is surely a high-risk investment avenue that could also yield the highest returns.
So, would you prefer investing in crypto or the stock of Coinbase? Do let us know in the comments below.